Illustrated Solution: Problem 17-43 Chapter 17 Illustrated Solution: Problem 17-43 Preparing a Pension Worksheet

Pension Worksheet — Beginning Balances

Pension Worksheet — Beginning Balances + – + The “Periodic Pension Expense” column will have a zero balance at the beginning of the period—think of it as an expense account that was closed out at the end of last period just like any other expense account. The other three highlighted accounts above can be thought of as balance sheet accounts. Assets should have a debit balance (positive sign) and liabilities should have a credit balance (negative sign).

Pension Worksheet — Beginning Balances + – + + + – One way to think of these items is to consider them future expenses. (Notice that at the present time they are all “unamortized” or “unrecognized.”) The opening balance in these columns should be a debit (positive sign) if these items will increase pension expense when they are recognized. Likewise, the opening balance should be a credit (negative sign) if these items will reduce pension expense when they are recognized.

Pension Worksheet — Beginning Balances + = – + + + –

Pension Worksheet — Beginning Balances Balance Sheet Accounts

Pension Worksheet — Beginning Balances Deferred Expense Accounts

Pension Worksheet — Beginning Balances =

Pension Worksheet — Given Information

Interest Cost Projected benefit obligation, Jan. 1, 2001 $3,800 Settlement discount rate  12% Interest cost $ 456

Service Cost 2001 service cost: Projected benefit obligation, Dec. 31, 2001 $4,161 Less: Projected benefit obligation, Jan. 1, 2001 3,800 Increase in projected benefit obligation $ 361 Less: Interest cost (.12  $3,800) (456) Plus: Benefits paid 185 Service cost $ 90

Pension Worksheet

Pension Worksheet

Unrecognized Gain Market-related value of pension plan assets (5-year weighted average) 2,100 Expected rate of return x 10% Expected return on plan assets 210 Actual return on plan assets 220 Deferred gain 10

Pension Worksheet

Amortization of Unrecognized Prior Service Cost Number of years for amortization  12 Amortization per year $ 61

Pension Worksheet

Corridor Comparison for Unrecognized Gain Corridor amount, 10% x $3,800, or $380 Unrecognized gain—$60 Amortization is $0 for 2001

Pension Worksheet

Pension Worksheet

Pension Worksheet

Pension Worksheet =

Pension Worksheet 430

Pension Worksheet

Pension Worksheet — Completed

End of Problem